Hold Your NFTs, Here Come the Lawyers
Hold your NFTs, here come the lawyers. With NFT sales going from $13 Million in 2020 to $14 Billion in 2021, it should come as no surprise that the lawyers would soon turn up. And turn up they have. Courts around the world are asking… What the heck is an NFT? Here’s a snapshot of the fun:
Jay-Z: Someone offered for sale an NFT of Jay-Z’s album “Reasonable Doubt” promising to “provide ownership of the album’s copyright & future revenue”. Unfortunately that person did not own the copyright & Roc-A-Fella Records is off to court
Playboy: Over 1000 people paid more than a million dollars to buy Playboy’s “Rabbitar” NFTs. Unfortunately it was a scam and those poor folks ended up Rabbitar-less. Off to court for this one too
Tarantino Tiff: Quentin announced plans to sell NFTs of digital scans of handwritten pages of the “Pulp Fiction” script. Miramax, the owners of the film see it a bit differently & are in court to stop QT from his NFT
Handbag Fight: An artist sold a bunch of “MetaBirkins” for $47K each. The MetaBirkins are NFTs of drawings of furry Birkin handbags. Hermes, the makers of the Birkin, did not see the funny side of this & have launched court proceedings against the artist. It is a fascinating argument as the artist is claiming it is the same as Andy Warhol’s Campbell’s Soup cans
2nd-best: A collector was in an online auction for an NFT artwork. The artwork sold for $1.2M & the collector was the underbidder but, according to the terms of the auction site, all 99 underbidders had to buy the same NFT at the price of the highest bid they individually made. Not surprisingly the underbidders are not so keen on that idea — court time
NFTs as securities: There is a court case considering if NFTs are actually securities under US law. If they are they could only be sold to sophisticated (ie wealthy) investors not retail buyers. Could you imagine what would happen to the NFT market if they are found to be securities?
Some of the questions to be considered by courts are:
– If you have an NFT do you have a contractual right, a licence or something else
– Are there actually property rights (other than copyright) in a JPEG file (no is surely the answer)
– Are you buying art or as one court is considering “just a unique string of code stored on a blockchain ledger that makes a digital artwork accessible”
Many NFT-lovers will think the NFTs above the law, citing John Barlow’s 1996 “Declaration of the Independence of Cyberspace,” in which the cyberlibertarian poet proclaimed that govts of the world (“you weary giants of flesh & steel”) had no sovereignty over the ethereal realm of the internet. “Your legal concepts,” he wrote, “do not apply to us”
If you want to learn more about NFTs, check out my NFT primer in gameshow style, “The NFT Price is Right” – everything you need to understand this fascinating digital asset.